A viable reform plan for Social Security has to take several things into account. The new system must provide young Americans with a secure form of retirement income, maintain the benefits of those already in or near retirement and be capable of sustaining economic growth. The creation of personal retirement accounts would be able to accomplish all of the above!

Creating personal retirement accounts would allow young workers to keep a portion of their Social Security taxes and place that money in an individual retirement account. Workers would then invest that money in stocks, bonds, and equities in order to build a nest egg for their retirement. Once a worker retires, he or she would draw upon his or her PRA savings to provide income during retirement.

If given the right to create a personal account YOU would own your account and YOU would control your account. Right now, your Social Security taxes are being spent by Congress, but, through ownership, you can be confident about the future of your retirement savings.

Additionally, a personal account will yield a much higher return—hence, a much higher retirement income—than the government system promises. Under the current system, your payroll taxes earn a real rate of return of about 2%.³ But if you had a personal account invested in a mix stocks and equities you could earn an average real rate of return of 5.5% or possibly even more.⁴ That means you would earn 175% more with a personal account!

Creating personal retirement accounts will not eliminate or even reduce the benefits of your parents or grandparents who may be near or in retirement. If personal accounts were created, there would be a transition period in which only a small percentage of your Social Security taxes could be moved to a personal account; the rest of the taxes would continue to fund the existing system. Current benefits would be preserved and you get to save for your future at the same time.

Personal retirement accounts would feed the economy by increasing savings and investment. When savings and investment grows productivity increases, wages rise, unemployment shrinks, and the economy grows.

Without personal retirement accounts, the government will most likely have to increase taxes to support the Social Security system. Since half of all Social Security taxes are paid by employers, the cost of hiring new workers will soar as well: unemployment will rise, productivity will decline, and salaries will shrink. To make matters worse, young Americans will suffer the worst from the economic decline because rising unemployment will make it much harder for recent graduates to find a job and support ourselves.